In a court ruling on Thursday, Dec. 28, a U.S. federal judge sided with the Securities and Exchange Commission (SEC) against Terraform Labs and its founder Do Kwon regarding the offering and sale of unregistered securities.
The decision was handed down by U.S. District Judge Jed Rakoff in Manhattan, who also ruled in the SEC's favor concerning security-based swaps, Reuters reported.
Judge Rakoff did not grant summary judgment for either party on the SEC's accusations of fraud. This aspect of the case is set to move forward to a trial, which is scheduled for Jan. 29, 2024.
“We strongly disagree with the decision and do not believe that the UST stablecoin or the other tokens at issue are securities," said a Terraform Labs spokesperson. "Further, the SEC’s fraud claims are not supported by evidence, and we will continue to vigorously defend against those meritless allegations at trial.”
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Do Kwon is known for his involvement with the cryptocurrencies TerraUSD and its counterpart Luna (CRYPTO: LUNA).
These digital currencies experienced a significant loss in 2022, with an estimated value drop of over $40 billion, primarily due to TerraUSD's failure to maintain its peg to the U.S. dollar.
The SEC has charged Terraform and Kwon with deceiving investors about the stability of TerraUSD and making claims about the potential increase in the value of its crypto tokens.
In addition to these charges, Kwon is facing fraud allegations from U.S. prosecutors in Manhattan and is currently contesting extradition to the United States.
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Editor's Note: This article was updated 12.29.2023 with the statement from Terraform.
Photo: Pixabay
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